USDA Capital Improvement addedum

[litch96]

I have been asked to fill out this addendum. I am curious if someone has completed this before. As I have never fill one of these out.

 

[TerryRohrer]

I have never seen a specific form for that purpose. They are looking for a list of "improvements" made by the borrower since initiation of the loan (over and above maintenance items) and an estimate of their contributory value. My approach has been to simply state they don't have any measurable impact on value unless they are items that I have adjusted for in the SCA grid. So, if there was an addition to GLA, I would use my adjustment rate for GLA times that added square footage. Those numbers are used to compute how much of the increase in value over the original purchase price will go to the government vs. the borrower. So, needless to say, don't be making adjustments and estimating contributory value for items you cannot support.

 

[litch96]

I have never seen a specific form for that purpose. They are looking for a list of "improvements" made by the borrower since initiation of the loan (over and above maintenance items) and an estimate of their contributory value. My approach has been to simply state they don't have any measurable impact on value unless they are items that I have adjusted for in the SCA grid. So, if there was an addition to GLA, I would use my adjustment rate for GLA times that added square footage. Those numbers are used to compute how much of the increase in value over the original purchase price will go to the government vs. the borrower. So, needless to say, don't be making adjustments and estimating contributory value for items you cannot support.

I guess where I am confused is the borrower stated refinished the basement? I have no idea what it looked like before. Of course I adjusted for a finished basement. Also it states they added a patio then states added a brick patio. If I remember correctly they redid the patio to brick so there would not be an added value from the way it was before. But you cannot explain this on the form.

 

[Vermonter]

Sounds like something for the borrower to complete.

 

[TerryRohrer]

I guess where I am confused is the borrower stated refinished the basement? I have no idea what it looked like before. Of course I adjusted for a finished basement. Also it states they added a patio then states added a brick patio. If I remember correctly they redid the patio to brick so there would not be an added value from the way it was before. But you cannot explain this on the form.

I would just put what the borrower said, make and state an assumption about what you think was there, estimate the contributory value of the difference, and move on. If they (USDA employees) are earning their keep, they will have a file with the original appraisal on their desk and verify if they wish.

 

[Terrel L. Shields]

If certain improvements, referred to as capital improvements, are made to the property, the value of the improvements added may be used to reduce subsidy recapture owed. To receive credit for capital improvements, the appraiser should submit an addendum to the appraisal. Instruct the appraiser that an itemized list of the improvements or additions and the value the improvements or additions added to the property should be submitted along with the appraisal. The cost of the improvements or additions should not be submitted and will not be used. Replacement items such as kitchen cabinets, floor coverings, roofing, siding, furnaces, appliances, and water heaters are not considered capital improvements. Maintenance items or repairs that maintain the property in good condition, such as yard maintenance, painting, and wallpapering, are also not considered capital improvements in our calculation of subsidy recapture. Examples of capital improvements include, but are not limited to, room additions, adding a fence, deck or enclosed porch.​

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You need to contact the lender and have them provide the itemized list of improvements...​

 

[sputnam]

I have been asked to fill out this addendum. I am curious if someone has completed this before. As I have never fill one of these out.

Umm.... what addendum?